Overview
Memory chip prices have surged more than sixfold over the past twelve months, ending a multi‑decade era of near‑metronomic price declines and sparking a structural supply crisis, according to Morgan Stanley equity analysts Shawn Kim and Joseph Moore.
Market Size and Growth
TrendForce forecasts the global DRAM market to expand from roughly $220 billion in 2025 to about $890 billion in 2026, an incremental increase of approximately $670 billion – a magnitude larger than the entire addressable market for smartphones, personal computers or servers taken individually.
Historical Pricing Context
From 1957 to 2020, the price of a gigabyte of DRAM fell roughly tenfold every five years; that long‑standing decline has now ceased.
Demand Drivers and Supply Constraints
Artificial intelligence has generated a sudden, price‑inelastic jump in memory demand, while supply cannot keep pace because installing new extreme‑ultraviolet lithography tools, qualifying processes and ramping yields requires a two‑year cycle. Three DRAM manufacturers, together controlling about 90% of DRAM output and virtually all high‑bandwidth memory (HBM), are directing scarce leading‑edge wafers toward higher‑margin HBM and server‑grade DRAM. Bit supply is expanding only about 30% per year, limited by EUV tool availability and wafer capacity, whereas revenue is rising roughly fourfold, indicating that the spend surge is driven almost entirely by price rather than volume.
Capacity Outlook and Shortfalls
Global DRAM wafer capacity is expected to grow by roughly 30% by 2027, yet the industry’s AI focus is likely to leave consumer markets undersupplied. By 2027, PC DRAM supply is projected to fall about 15% short of demand – equivalent to roughly 58 million units – while smartphone DRAM is expected to face a 12% shortfall, or about 134 million units.
High‑Bandwidth Memory (HBM) Dynamics
HBM consumes three to four times more wafer capacity per usable bit than conventional DRAM. Consequently, HBM’s share of leading‑edge memory wafer capacity is forecast to rise from about 6% in 2023 to 34% by 2028.
Pricing Implications for End‑Products
To preserve gross margins solely through higher memory costs, average selling prices would need to increase by approximately 34% for smartphones, 67% for PCs, 83% for servers, and 14% for storage products. A 67% rise in PC ASP would represent the largest such increase on record, outpacing pandemic‑era inflationary spikes by a factor of eight to nine.
Market Reactions
Analysts note that manufacturers are unlikely to pass the entire cost through to consumers, resulting instead in margin pressure, specification cuts and delayed product launches. Memory costs bypass traditional consumer price indexes because memory is an intermediate input embedded in capital goods and services. Producer‑price data show electronic components up about 30% year‑on‑year.
Emerging Two‑Tier Market Structure
A bifurcated market is forming: hyperscalers are securing supply through long‑term agreements and pre‑payments, while other players compete for a smaller, more volatile residual pool.